Tesla explains disadvantages of buying by bitcoin

BTC is now all over the news and there are tons of shops, where you already can buy with cryptocurrencies. Some of them even offer coupons. The details of the bitcoin purchase at Tesla show: Because of the jump in the exchange rate, payment is actually made in US dollars, along with disadvantages.

A few days ago, the electric car manufacturer Tesla announced that it would also accept the so-called cryptocurrency Bitcoin as a means of payment in its home country USA. Electrek magazine took a closer look at the details of the actual payment modalities. It turns out that Tesla itself basically advises against buying its cars with it because of possible financial risks associated with Bitcoin.

  • According to the document, Tesla first gives some obvious hints about the process when making a corresponding payment using Bitcoin. For example, this requires buyers to have a digital wallet and Internet access.
  • Tesla also imposes responsibility for the correct destination address on buyers in its terms and conditions. This is because, unlike with bank transactions, for example, where this may be possible under certain circumstances, an accidentally incorrect transaction cannot be reversed.
  • The manufacturer also specifies that the purchase price is only available in US dollars, which is probably simply due to the jump in the Bitcoin exchange rate. When buying a Tesla via Bitcoin, the Bitcoin price is merely converted at the current rate and the purchase must then be made within a previously defined time window.

People who have been speculating with the so-called cryptocurrency for a longer period of time and thus have had corresponding Bitcoin for a longer period of time could actually possibly purchase a Tesla cheaply thanks to a rising price. However, in the event of a short-term jump in the price, they could also pay significantly too much.

No refund in Bitcoin

No refund in BitcoinFurthermore, should customers transfer more than the stated Bitcoin price digitally for whatever reason, the company reserves the right to keep this excess. A refund is explicitly excluded.

For regular refunds, Tesla additionally reserves the right to settle this in Bitcoin or the regular amount in US dollars. There is no entitlement to a refund in Bitcoin. Compared to the Bitcoin rate at the time of purchase, buyers could also make a significant loss on this.

Tesla had declared in February that it had already purchased $1.5 billion worth of Bitcoin. Because of the high energy requirements for Bitcoin transactions, however, Tesla has come under criticism. Most recently, analysts at Bank of America pointed out that buying $1 billion worth of Bitcoin releases as much carbon dioxide as 1.2 million internal combustion engine vehicles in a year.

Buy Tesla with Bitcoin?

Nobody really knows why yet, but last week Tesla put its announcement from the end of January into action that its products can also be paid for in Bitcoin as soon as possible. With customers so far exclusively in the US, the cryptocurrency has since been offered as one of Tesla’s payment options, and some already made use of it. However, the well-known author Nassim Taleb said about the new option that it is not yet a real Bitcoin purchase at Tesla. And he pointed out that the crypto terms are strongly designed in favor of the company.

Rate at Tesla only valid for 30 minutes

One of the contentious issues with Bitcoin is whether it is a currency at all (in the sense of a medium of exchange for financial transactions) or just a virtual investment or even speculative asset. Taleb, who is best known for his book “The Black Swan” about risks and their distorted perception (and is himself a Tesla owner), is one of the opponents in this respect: You would have to be “seeeeeevery” ignorant to treat a speculative investment as a currency or a means of storing value, he wrote on Twitter last week.

Even the fact that you can now use it to pay for a Tesla doesn’t make Bitcoin a currency, Taleb went on to explain: electric car prices are still set in U.S. dollars and then just converted to Bitcoin for the transaction. He made this point about the fact that the Bitcoin amount to be paid fluctuates depending on the current exchange rate, as confirmed by a Model Y orderer: When displaying the $100 deposit as 0.00185614 BTC, Tesla pointed out that it must be paid within 30 minutes and otherwise recalculated.

What exactly Bitcoin is and may or may not yet become is likely to remain controversial for a while. However, according to Taleb’s observations, it is already clear that the crypto conditions at Tesla are conceivably designed unfavorably for customers – and correspondingly advantageous for the company. Tesla is securing a “free option” with bitcoin payments, he wrote.

That’s because its terms and conditions state that Tesla reserves the right to decide for itself whether a potential refund or repurchase is settled in dollars or bitcoin. “You have no right to choose the method of reimbursement,” it clearly states to customers – the risk of rising or falling Bitcoin exchange rates is theirs.

All bitcoin risks lie with the customer

bitcoin risksSo, for example, if you pay $50,000 for a Tesla at the bitcoin rate in effect when you order it and then don’t want it after all, you can return it. But if Bitcoin has fallen in the meantime, Tesla could then choose to pay it back in cryptocurrency; if, on the other hand, the rate has risen since the initial transaction, the customer would instead get back only the original dollar value.

In the first case, Tesla loses nothing, and makes a risk-free profit in the second. And so, for now, the question is not only with what longer-term plans Tesla introduced the Bitcoin option, but also whether it is beneficial to any customer.

Musk ensures record high

With his announcement today, Tesla CEO Musk is making good on a promise he made in mid-March. At that time, he announced that he would accept Bitcoin as a means of payment for Tesla cars. Musk thus fueled the boom of the cryptocurrency, which subsequently reached a record high of $61,782.

Musk had already created bitcoin hype in early February when he bought bitcoins for $1.5 billion. On the same day, the cyber currency climbed above the $40,000 mark for the first time. Musk’s tweet on Wednesday also had an impact on the crypto market. In the morning, bitcoin rose by about $2,000 to $56,250. Other digital currencies such as Ether also rallied in midweek.

Risk cryptocurrency

Meanwhile, some analysts are warning that the Tesla CEO could jeopardize his company’s financial well-being with his crypto involvement. Musk, they say, is taking an unnecessary risk in an already risky industry.

The risk increases with every Tesla sold and paid for in Bitcoin: Musk announced that he would not exchange the Bitcoin amounts received into traditional currencies. “Bitcoin paid to Tesla will remain Bitcoin and will not be converted into fiat currency,” the multi-billionaire said. Fiat comes from the Latin word for “let there be” – thus referring to money created by a central bank. Its value is not tied to a commodity such as gold and is based on the public’s trust in the respective central bank. The euro, U.S. dollar and Swiss franc are referred to as fiat currencies.

Traditional currencies are also criticized as “compulsory money” by crypto payment proponents. In contrast, Bitcoins are generated by so-called mining by computers and are not controlled by any central authority.